Elmo Rent submitted a reorganization petition to the court
Limited company Elmo Rent (hereinafter "Elmo group's parent company") informs that on November 18, 2023, Elmo group's parent company filed an application with Harju County Court to initiate the reorganization proceedings. The reorganization involves only Elmo Rent Ltd, and the reorganization does not affect the other companies in the Elmo group.
Since the decision of the board on December 22, 2022, Elmo group's parent company has been separating the short-term rental and remote driving technology business directions into subsidiaries to ensure clarity of business directions, capital raising according to the business model, and sustainability. While technology development and sales have been transferred to a separate subsidiary with active investment engagement, the rental part is still partially within the Elmo group's parent company. The expansion of the rental business has been directly dependent on raising equity and financial instruments, which, in the current challenging financial landscape, has not brought in sufficient additional capital. Coupled with the delay of the 2023 peak season by about a month (general change in consumer behavior), this has led to a greater loss in the rental business direction. Despite a somewhat increased revenue per car and justified changes in business strategy (bringing rental cars to the customer's doorstep), the total revenue has not increased as planned and, in addition, the losses have grown due to significantly increased costs in the car fleet, operations, and the development of the necessary IT system.
The parent company of Elmo group has begun searching for a partner or buyer for the short-term rental business direction, where several parallel negotiations are taking place, but choosing a suitable partner is expected to take several more months.
To overcome the aforementioned difficulties, the parent company of Elmo group applied for the initiation of reorganization proceedings. The parent company of Elmo group believes that reorganization is the best way to protect the rights and interests of the shareholders, employees, creditors, and collaborators of the parent company of Elmo group in the current situation. The company believes that through the reorganization process and the measures implemented during it, it is possible to overcome the payment difficulties of the parent company of Elmo group, restore liquidity, improve profitability, and ensure sustainable management of the company. This is supported by the restructuring and measures already taken by the parent company of Elmo group to improve the business model, such as terminating unprofitable car leases, taking over certain overdue loan obligations by the largest shareholders, reducing administrative costs, and much more.
If the reorganization of the parent company of Elmo group is successfully completed and the payment difficulties of the company are overcome, it will be possible to continue the activities of the parent company of Elmo group and preserve a significant amount of valuable competence and intangible assets. In addition, the successful reorganization of the company would help ensure the continuation of the activities of the only provider of environmentally friendly vehicle sharing services and a pioneer in sharing services in Estonia.
Due to the initiation of reorganization proceedings, the parent company of Elmo group must prepare a reorganization plan. The preparation of the reorganization plan will take place in consultation with the main partners and creditors of the parent company of Elmo group. The reorganization plan will specify in more detail what reorganization measures will be implemented, including the impact of the reorganization on creditors. A vote of creditors will take place to adopt the reorganization plan. The court will make the final decision regarding the approval of the plan.
Additional information:
Enn Laansoo, Jr.
Management Board Member
ELMO Rent AS
enn@elmorent.ee
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